WASHINGTON (Reuters) – The Treasury Department said on Thursday it reached an agreement to sell its remaining 6 percent equity stake in Chrysler to Italy's Fiat in a deal that will net Washington $560 million.
The proceeds of the deal include the sale of the government's interest in a UAW retiree trust, Treasury said in a mid-evening statement.
The Obama administration invested $12.5 billion in Chrysler under the Troubled Asset Relief Program during the 2007-2009 financial crisis and said that, after the transaction, Chrysler will have returned more than $11.2 billion of that amount.
"Treasury is unlikely to fully recover the difference of $1.3 billion," the statement said.
Fiat agreed to pay Treasury $500 million for Treasury's 98,461 shares of Chrysler. Treasury also had an option to buy shares held by the UAW retiree trust and Fiat agreed to buy that for $75 million -- with Treasury to get $60 million and the government of Canada $15 million.
The announcement of the deal with Fiat came on the eve of President Barack Obama's scheduled visit to a Chrysler plant in Toledo, Ohio, where he is expected to tout the success of the auto bailout that saved American jobs and auto nameplates like Chrysler.
Treasury said that, once the transaction is completed, it would have fully exited its investment in Chrysler.
Fiat held a 46 percent interest in Chrysler, which will rise to 52 percent when the transaction is completed and thus give the Italian automaker majority control, which was one of Fiat Chief Executive Officer Sergio Marchionne's overarching goals for 2011.
Fiat has made swift work toward that goal in the past six months after meeting certain performance targets and repaying its $7.6 billion in loans owed to the United States and Canada last week.
Chrysler filed for bankruptcy protection in 2009 after the credit crunch and recession pummeled auto sales. June 10 will mark the two-year anniversary of Chrysler's emergence from bankruptcy under the management of Fiat.
As the two companies deepen their financial ties, they are also drawing closer together operationally. Earlier this year, Marchionne left open the possibility of a full merger of the two companies with a single headquarters.
Marchionne's revival strategy for both automakers hinges on boosting combined sales to 6.6 million vehicles by 2014.
An initial public offering is also possible, but Marchionne said this week the timing and possibility of an IPO would depend on the interest of the healthcare trust affiliated with the United Auto Workers union.
"I don't think there's a 100 percent guarantee of the fact that there is an IPO," Marchionne said this week at an event in Windsor, Ontario, just across the border from Detroit. But he added an IPO would be the "easiest way" to create value.
(Additional reporting by Jeff Mason and Deepa Seetharaman in Detroit, Editing by Peter Cooney)
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